In this week’s blog, our Account Advisor Tony Heffernan gives us his take on Budget 2016 and what the prospects are for
the coalition as we face the as yet unannounced General Election…

All budgets are politically important, but few budgets were as politically crucial as the one delivered this week by Michael Noonan and Brendan Howlin.

After four successive years in which the combination of an unprecedented economic crisis and Troika demands required the coalition government to inflict unprecedented pain on the electorate, the sense of relief among Fine Gael and Labour backbenchers was palpable at the modest giveaway represented by this year’s budget.

A government knows that it has been strategically successful with a budget when the opposition parties are reduced to criticising it for what is not in it, or for ‘a lack of strategic vision’.

The fact that the budget ‘goodies’ were so extensively leaked probably diminished the impact and the potential feel-good factor for the public. Budget secrets were once regarded as sacrosanct, but the demands of the modern media and particularly the pressures on parties within a coalition government to be able to claim victories, have meant that contents are now widely and systematically leaked.

It is hard to believe that as recently as 1995 Phil Hogan was forced to resign as Minister of State at the Department of Finance because somebody in this office issued a press statement welcoming a budgetary change before it had actually been announced. In an even starker example the British Chancellor of the Exchequer, Hugh Dalton, was forced to resign in 1948 because of a throw-away remark he made to a journalist on the way into the House of Commons about potential changes to the tax system.

However, despite the advance leaks, the initial reaction to the budget as heard in the various ‘vox-pops’ carried on radio and television and reported in the print media seemed largely positive and the reaction from various representative groups was certainly less critical than in previous years, but the first opinion polls, which will give a more scientific measure of public opinion, will be closely watched by both Government and opposition parties.

The two Government parties, and Labour in particular, have paid a very high price for previous budgets. It remains to be seen if sufficient numbers of the electorate will be appeased by the offerings in this budget and prepared to forget about the pain of the past four years.

Labour TDs seemed to be the most pleased with the budget and certainly many of the initiatives bore the stamp of Joan Burton and her colleagues. For instance, the original Fine Gael proposal of cutting the upper rate of income tax was dropped as Labour pushed to put all available resources into cutting the USC. On the other hand Fine Gael was able to deliver for business and farmers – a particularly important political constituency for Enda Kenny.

One area where Labour failed to get what it wanted was the whole problem of homelessness and rent certainty. Minister for the Environment, Alan Kelly, believes that the spiralling level of rents charged, particularly in urban areas, is driving more and more families on the street and that imposing measures to restrict the rate of increase in rents to the Consumer Price Index is crucial to combatting homelessness. In this view he is supported by most of the voluntary groups operating in the area. Fine Gael and Michael Noonan in particular (although he may be merely reflecting the views of the Department of Finance) apparently remain resolutely opposed. It is probable that some sort of a compromise with be cobbled together, but delivering some significant initiative in this area will have a big impact on Labour’s prospects in the election whenever it is called.

With the Taoiseach having firmly ruled out an election until sometime in the new year, the two parties have at most four months to show that they have the will and ability to deal with the homelessness problem. They will also need to use this time to put the divisions and the negative publicity about the timing of the election firmly behind them.

If they do hold off until well into the New Year, it will be the first time that a Fine Gael/Labour government will have ever completed a full term in office. It will then be able to contrast the ability of the two parties in government to work together to turn the country around, while comparing it to what they will depict as the differences and divisions among the disparate opposition parties. Offering a choice between stability and ‘the devil you know’ against the uncertainties of unproven opposition parties certainly worked for Bertie Ahern and Fianna Fail in the 2007 election. It remains to be seen if it will work for Enda Kenny and Joan Burton.